1. The assessee is the proprietor of a hotel. He started his life as an employee in another hotel in or about 1928, He set up his own business in 1944. As he had not maintained proper accounts his income for the assessment years 1950-51 to 1953-54 were assessed on an estimate basis. During the assessment proceedings for 1958-59, a wealth statement was obtained from the assessee. It came to light that the asses-see purchased in March, 1954, in a court auction sale the property bearing No. 5, Sunkuvar Street, Triplicane, in the name of his wife for Rs. 30,000 in execution of a decree in his favour for Rs. 53,417 in C.S. No. 353/52. The suit was filed by him against the legal representative of his paternal uncle, one S. V. Rao, who was the managing director of Premier Bank Ltd., for the recovery of the amount due to the assessee under a pronote dated June 23, 1961, for Rs. 50,000 executed by his late uncle. The papers also disclosed that there were six chit transactions with the same bank in the name of the assessee and his relatives. When asked to explain the origin and source for the pronote loan the assessee wrote to the Income-tax Officer on October 10, 1958, stating that it comprised of his savings left with S. V. Rao and the loans obtained by the assessee from the Premier Bank Ltd. but utilised by S. V. Rao for his personal purposes. On October 23, 1958, the assessee was examined and in his statement he had stated that in 1949 the amount due from S. V. Rao in respect of deposits left with him was Rs. 31,000 and a sum of Rs. 12,006 was due from Rao towards the balance of the borrowings of Rs. 25,000 from the bank but utilised by Rao. In respect of the chit transactions he had stated that they were all taken by Rao with the ostensible purpose of utilising the matured amounts to pay off the sums due to the assessee and that the chits were taken in the name of the assessee and his relations as the managing director of the bankwas precluded to open chit accounts. Another explanatory statement was filed by the assessee through his chartered accountant on November 14, 1958, that the loans to the tune of Rs. 25,000 standing in the assessee's name in the bank and proceeds of which were utilised by Rao were discharged by Rao himself out of the chit amounts which had matured in 1950 and 1951. The assessee filed a further statement on November 24, 1958, in which he had stated that Rao had utilised for his benefit 'not only Rs. 12,122 being the balance of the pronote loans of Rs. 25,000 after repayment of the earlier loans of Rs. 6,000 each (total repayment including interest was Rs. 12,878) but also the earlier issue of Rs. 6,000 each'.
2. The Income-tax Officer initiated reassessment proceedings under Section 34(1)(a) of the Indian Income-tax Act, 1922 (hereinafter called 'the Act'), after obtaining the sanction of the Commissioner of Income-tax, Madras. In response to the notice the assessee filed fresh returns of income. Except for very minor variations the returns submitted disclosed only the income which was computed at the time of the original assessment. The Income-tax Officer considered that the explanation given by the assessee in respect of the pronote loan and the various borrowings from the bank and the purchase of properties were contradictory and unreliable. At the time of original assessment for 1950-51 the assessee was asked to explain the source for purchase of a house at No. 2, Kachaleeswarar Agra-haram, which was not accounted for in the books. He had stated that the property was purchased out of the borrowings from the bank under two loans for Rs. 6,000 and Rs. 10,000. These two sums were later in the statements given in 1958 shown as included in the total borrowings of Rs. 25,000 which was stated to have been utilised by Rao and formed part of the consideration for the promissory note of Rs. 50,000. Yet another explanation given was that out of the borrowing of Rs, 25,000 a sum of Rs. 11,000 was discharged on August 23, 1950, by Rao himself when some chit transactions matured leaving a balance of Rs. 14,000 and this amount with his deposits made prior to 1949 amounted to Rs. 30,000. Since Rao was heavily involved in debts and it was considered that the assessee might not be able to recover cent, per cent. of his loan he got executed a promissory note for the inflated amount of Rs. 50,000 and as security for the payment of the loan, the title deeds of Rao relating to Sunkuvar Street property were deposited with the assessee. The suit was filed some time in 1952 for the entire sum of Rs. 50,000 with interest and a decree was obtained for Rs. 53,417 in November, 1953. But it was given in the statements that the balance of the loan of Rs. 14,000 borrowed from the bank was discharged on February 2, 1952, with the amounts received when the other chits matured. The Income-tax Officer also rejected certain other papers produced by the assessee as evidencing the dealings between Rao andthe assessee as they did not bear the signature of Rao. The Income-tax Officer accordingly was of the view that the chit transactions were that of the assessee and that the sum of Rs. 50,000 for which the promissory note was executed by Rao should have been advanced by the assessee from out of his earnings which have not been accounted for. In the result, he added a sum of Rs. 9,393 which was the amount contributed towards the chit transactions during the previous year relevant to the assessment year 1950-51 and made a reassessment order accordingly. In respect of the assessment year 1951-52 the discharge of the loan of Rs. 11,000 to the Premier Bank which fell within the previous year to that assessment year was included in the assessment and reassessment order was made accordingly. For 1952-53 the Income-tax Officer added a sum of Rs. 50,000 advanced on the promissory note together with a sum of Rs. 200 as interest due thereon in the reassessment order. For 1953-54 in the reassessment order he included a sum of Rs. 14,000 which was the amount that was paid to the bank in discharge of the loan in the previous year relevant to that assessment year. These reassessment orders were made on March 23, 1960, in respect of all those assessment years. The orders also stated that penalty action had already been taken for concealment and furnishing of inaccurate particulars of income under Section 28(1)(c). The assessee preferred an appeal against all these reassessment orders. The Appellate Assistant Commissioner was of the view that though the papers produced by the assessee as having been handed over by Rao, which disclosed the . various dealings between the assessee and Rao, are not acceptable and they lacked authenticity, it raised a grave doubt on the point in issue and, therefore, the amount of escaped income in the various years had to be considered, on the basis of the accretion to the assessee's wealth. According to his working such accretion amounted to Rs. 68,000 and that it had accrued over a period of 9 years. In that view he set aside the reassessment orders and directed the Income-tax Officer to redo the assessment by spreading over the increase in wealth equitably. The department preferred an appeal to the Tribunal. The Tribunal observed that there had been a lot of confusion, that Rao had helped the assessee by getting loan from the Premier Bank and that he had also helped himself to some extent out of the advance secured by the assessee and that no correlation was available of specific items of advances and utilisation by the assessee and Rao respectively. The Tribunal, therefore, considered that the accretion to wealth was the proper method to estimate the income. It, however, fixed the accretion to the wealth at Rs. 75,000 including the sum of Rs. 7,000 to the amount fixed by the Appellate Assistant Commissioner. The Tribunal also directed that the sum of Rs. 75,000 be assessed in the following manner:
3. Consequent on the Appellate Tribunal's order the Income-tax Officer passed orders on October 29, 1963, revising the assessments.
4. In the penalty proceedings initiated by notice dated March 17, 1960, the assessee contended that there was no concealment, that the assessee was merely a benamidar for Rao and that he was unable to prove his case due to the death of Rao and that, therefore, no penalty could be levied. The Income-tax Officer held that the increase in wealth of the assessee disproved the claim of benami and that there was a deliberate concealment of income. He accordingly levied penalties of Rs. 4,800, Rs, 4,500, Rs. 6,100 and Rs. 3,400, respectively, for the assessment years 1950-51 to 1953-54. The Appellate Assistant Commissioner confirmed this order.
5. Before the Tribunal, the assessee contended that since the Appellate Assistant Commissioner, in the appeal filed against the reassessment orders, set aside the original assessment and directed a revised assessment to be made and the revised assessment orders having been made only on October 29, 1963, after the coming into force of the new Act (Income-tax Act, 1961), penalty proceedings, if at all, could be taken only by the Inspecting Assistant Commissioner under the new Act. In regard to the additions it was submitted that they were all ad hoc additions, that in arriving at the net accretion of wealth no account had been taken of the savings between 1928 and 1944, that an outstanding loan to the Premier Bank to an extent of Rs. 5,768 as on September 30, 1962, had not been taken into account and that one of the items of remittances which was included in the wealth was purchased in April, 1947, for. Rs. 7,100 and that should not have been included in computing the net accretion. It was also submitted that the department was made aware of the existence of the various properties in the course of the original proceedings for 1958-59 and, therefore, there was no concealment. It was urged that in these circumstances no penalty should have been levied and required the penalty orders to be cancelled. It was contended on behalf of the department that the assessment orders had been made prior to April 1, 1962, that the Appellate Tribunal's order restored these orders with certain modification, that the orders passed on October 29, 1963, in conformity with the Appellate Tribunal's order were only revisional orders to give effect to the Appellate Tribunal's order, that Section 297(2)(f) saved these proceedings and that, therefore, the penalty proceedings had been rightly taken under Section 28(1)(c).
6. The Tribunal accepted the department's contention and held that the penalty proceedings had been rightly taken under Section 28(1)(c) of the Act. On the merits, the Tribunal felt that they were not fully convinced on the facts that the assessee could be charged with a guilt of concealing of income or deliberately furnishing inaccurate particulars thereof and that, therefore, this is not a case where the provisions of Section 28(1)(c) could be said to be applicable. The reasoning of the Tribunal for arriving at that conclusion was as follows : Tn arriving at the net accretion of wealth at Rs. 75,000 the savings of the assessee between 1928 and 1944 and certain loans outstanding had not been taken into account. On the other hand, the value of the property purchased in 1947 prior to the assessment years in question had been included. Further, while the Appellate Assistant Commissioner arrived at the conclusion that the accretion was Rs. 68,000 and directed the sum to be spread over a period of nine years, the Tribunal fixed the value of the accretion at Rs. 75,000 and directed it to be spread over a period of four years and the additions thus made in the respective assessment years are, therefore, ad hoc additions. Thus, according to the Tribunal, there was an element of estimate as to the amounts as also in regard to the period to which the income was referable. The Tribunal also took note of the fact that the existence of this wealth was given by the assessee in the original assessment proceedings for 1958-59. Ultimately, the Tribunal held that this is not a case where the provisions of Section 28(1)(c) can be said to be applicable. The department filed an application for reference and the Tribunal has referred the following question :
'Whether, on the facts and in the circumstances of the case, the provision of Section 28(1)(c) of the Indian Income-tax Act, 1922, was not applicable for the assessment years 1950-51 to 1953-54 ?'
7. The assessee while opposing this reference further submitted that if a reference was to be made the following question should also be referred :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the penalty proceedings were properly initiated and leviable under the provisions of the Indian Income-tax Act, 1922?'
8. The Tribunal observed that the question as framed by them would cover the issue sought to be raised by the assessee also and that, therefore, it need not be separately referred and in that view referred the only question above set out.
9. The question as to whether the penalty proceedings were properly initiated or leviable under the provisions of the Indian Income-tax Act, 1922, which was sought to be referred by the assessee while opposing the application for reference in the application filed by the revenue is not before us on proper reference even if that question is involved in the ques-tion referred to us. It is submitted that the assessee did not file any separate application for reference of this question and only by way of a counter to the application filed by the revenue he sought to refer that question. It has been repeatedly held by this court in Commissioner of Income-tax v. K. Rathnam Nadar, : 71ITR433(Mad) and other cases that it was not open to the assessee in reply to the application filed by the revenue to ask for reference of a question which it wants to be referred. The only way by which a party can ask for a reference of any question to the High Court is by filing an application under Section 66(1) or the corresponding provision in the new Act and, if that is refused, to apply to the High Court under Section 66(2). The question raised by the assessee, therefore, is not properly before us and even if a decision on that question is involved in the question referred that could not be answered by us.
10. The only question, therefore, which arises for consideration is on the merits as to whether on the facts and circumstances the provisions of Section 28(1)(c) were not applicable. This provision could be invoked and the assessee would be liable for penalty only if the assessee was guilty of concealment of income or deliberately furnishing inaccurate particulars thereof. It cannot be denied that accretions to wealth unless properly explained could be taken as evidence of concealment of income. It is true that concealment of income should be referable to a particular assessment year and that, therefore, unless the accretions to net wealth are also referable to that assessment year, concealment of income could not be inferred. But once it is shown that there is an accretion in wealth disproportionate to the income assessed during the relevant year it is for the assessee to prove that the acquisition was not with the income received during the assessment year in question. The acquisition of the property and the source from which the property was acquired are all within the exclusive knowledge of the assessee and he cannot merely plead that the onus is on the department to prove concealment and keep quiet. Further, in this case the Tribunal on the earlier occasion had already held that the accretions were referable to the assessment years 1950-5! to 1953-54 and that order is not liable to review. The Income-tax Officer and the Appellate Assistant Commissioner have held that the explanation given by the assessee was contradictory, that an increase in wealth disproved the claim of benami and that, therefore, there was a deliberate concealment of income. It is true that the Tribunal on the earlier occasion in Section 34 proceedings directed the allocation among the various assessment years on certain ad hoc basis. If the Tribunal in the present proceedings, is not satisfied with the estimation and allocation it is bound to give a finding as to whether there is any concealment of income or deliberate furnishing of inaccurate particulars.
11. By merely stating that in determining the accretion to net wealth at Rs. 75,000 the savings of the assessee between 1928 and 1944 and the loans outstanding, if any, had not been taken into account and that there was an ad hoc addition in respect of each year, the Tribunal cannot set aside the penalty orders. As already stated, the Income-tax Officer and the Appellate Assistant Commissioner had given certain reasons for holding that the assessee is guilty of concealment of income and deliberately furnishing inaccurate particulars. The Tribunal had also not considered those points.
12. The Tribunal should have considered itself as to whether there was any accretion to wealth in respect of each of the assessment years or directed the Appellate Assistant Commissioner to consider the same on the material available and give a clear and definite finding. In the absence of finding that there was no concealment of income in respect of the assessment years merely on the grounds that in the reassessment proceedings there was only an estimated ad hoc addition made in respect of each year, the Tribunal was not correct in holding that Section 28(1)(c) was not applicable.
13. We, therefore, answer the reference technically in the negative and in favour of the revenue. Hut this does not mean that the order of the Appellate Assistant Commissioner is confirmed. The Tribunal will now, while disposing of the case under Section 66(5), have to go into the question as to whether the evidence on record shows that there was any accretion of wealth warranting a finding of concealment of income in respect of each one of the assessment years and pass orders conformably with the findings. There will be no order as to costs.